Things are finally looking up for Hochschild Mining, says Berenberg

Berenberg has hiked its target price for the shares of precious metal producer Hochschild Mining by 30%, saying it's time to "revisit the investment case" after a tough number of years for the company.

The broker lifted its target from 100p to 130p, and reiterated a 'buy' stance on the stock, which was up 1.8% at 86.95p on Wednesday morning.

"Since 2018, 12 of the top 20 shareholders have reduced their stake in Hochschild, including the Hochschild family, which sold a 12% interest in 2020, with six shareholders fully selling out. In our view, investor interest is at its lows and now is the time to revisit the investment case," said analysts Richard Hatch and William Dalby.

Hochschild announced in early August that it had finally received a modified environmental impact assessment (MEIA) for its Inmaculada mine in Peru, a long-delayed milestone that has been hanging on the stock since the first half of 2022. For context, Inmaculada represents two thirds of production and 80% of operational free cash flow.

Meanwhile, the falling production and impending closure of the Pallancata project due to a lack of economic ore has also weighed on sentiment, Berenberg said.

However, there are now three key reasons to be optimistic, the broker believes: first, the MEIA for Inmaculada being approved; second, the new Mara Rosa mine in Brazil coming online in the coming year; and thirdly, the balance sheet approaching peak leverage, with net debt-to-EBITDA at 1.29x by the end of 2023.

"We think that as the company turns the corner operationally, and ramps up Mara Rosa, it will materially de-risk the investment case, and believe that with limited investor interest due to recent challenging years, the time is right to dust off the file on Hochschild."